HANOI/BEIJING, May 27 (Reuters) - Vietnam and China traded accusations on Tuesday over the sinking of a Vietnamese fishing boat not far from where China has parked an oil rig in the disputed South China Sea, as tensions fester between the two countries over the giant drilling platform.

Hanoi said some 40 Chinese fishing boats surrounded the Vietnamese craft on Monday before one of them rammed it and it sank. Vietnamese fishing boats operating nearby rescued the 10 fishermen on board, the government and the coastguard said.

China's official Xinhua news agency, citing a government source, said the vessel capsized after "harassing and colliding with" a Chinese fishing boat.

China Foreign Ministry spokesman Qin Gang said Vietnam caused the incident with its "insistence on forcefully disrupting China's normal operations and its dangerous actions on the seas.

"We urge the Vietnamese side once again to immediately stop all disruptive and damaging (activites)," he added.

Scores of Vietnamese and Chinese ships, including coastguard vessels, have continued to square off around the rig despite a series of collisions this month after the platform was towed to the site. Each side has blamed the other over those incidents. Until Monday, no ship had sunk.

The disputed incident took place around 17 nautical miles from the Haiyang Shiyou 981 rig, which is drilling between the Paracel islands occupied by China and the Vietnamese coast. China calls them the Xisha islands.

"A Vietnamese boat from the central city of Da Nang was deliberately encircled by 40 fishing vessels from China before it was attacked by a Chinese ship," the head of Vietnam's coastguard, Nguyen Quang Dam, told Reuters by telephone.

Xinhua said: "Crew aboard the boat were saved after their ship jostled a fishing boat from Dongfang City in southern China's Hainan province and overturned in the waters near China's Xisha Islands."

Vietnam has said the rig is in its 200-nautical mile exclusive economic zone and on its continental shelf. China says it is operating within its waters.

FIRST DRILLING ROUND COMPLETE

On Tuesday, the rig's operator, China Oilfield Services Ltd (COSL), said the rig had finished its first round of drilling and moved to another site in the area.

In a statement, COSL said exploration would still take place off the Xisha islands, suggesting the platform was not moving far.

The rig had "smoothly" completed the first phase of its work said COSL, the oil service arm of state-run China National Offshore Oil Company (CNOOC) Group, which owns the $1 billion platform.

COSL said it had obtained relevant geological data from the drilling, but did not give details or specify the current location of the rig.

Vietnam state television on Monday said its reporters on a nearby boat had seen the rig move but it didn't say how far.

In line with previous statements, COSL said drilling was on track to be completed by mid-August.

The rig is 240 km (150 miles) off Vietnam's coast and 330 km (206 miles) from the southern coast of China's Hainan island.

Vietnamese Prime Minister Nguyen Tan Dung last week said his government was considering taking legal action against China following the deployment of the rig.

That drew an angry response from China.

Earlier this month, mobs angered over the rig attacked mostly Taiwanese factories in Vietnam. Many of the rioters mistook Taiwanese companies to be owned by mainland Chinese. At least four workers were killed.

China claims about 90 percent of the South China Sea, displaying its reach on official maps with a so-called nine-dash line that stretches deep into the maritime heart of Southeast Asia. The Philippines, Vietnam, Malaysia, Brunei and Taiwan also have claims to parts of the potentially energy-rich waters. (Reporting by Nguyen Phuong Linh in HANOI, Michael Martina and Hui Li in BEIJING and Charlie Zhu in HONG KONG; Writing by Dean Yates; Editing by Ron Popeski)

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